Home loan applications also drop 40%, study reveals
Credit demand in New Zealand remained soft as consumer refinancing activity hit new lows in the first quarter of 2022, says Equifax.
The data analysis and credit reporting bureau has just released its January to March 2022 Quarterly Consumer Credit Demand Index.
Equifax NZ managing director Angus Luffman (pictured) said the number of consumers refinancing their loans was at its lowest level since the start of the pandemic and down 80% on 2019 levels.
“The decline in refinancing activity commenced with the Delta outbreak and lockdown in August 2021, dropping to near March 2020 levels,” Luffman said.
“The commencement of CCCFA changes saw a further acceleration in the decline of refinancing activity. Such a significant drop indicates consumers are holding onto their current relationships, rather than take the risk and effort of trying to get a better deal elsewhere.”
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The Consumer Credit Demand Index measures applications for retail credit products including credit cards, personal loans, and home loans across New Zealand.
According to the index, overall consumer enquiry volumes declined for the third quarter in a row with a year-on year reduction of 32% for the quarter ending March 2022.
Equifax found overall consumer credit applications reduced by 32.4%, home loan applications fell by 42%, and unsecured credit applications were down 32.3% compared to the March 2021 quarter.
However, Equifax confirmed consumer credit demand remained above the lows experienced during the April to June quarter of 2020.
Equifax said consumer credit demand was down across all major retail credit portfolios with the largest decline being for home loans, as borrowers continued to pull back from a market that was at its peak 12 months ago.
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“With rising interest rates, CCCFA and other related lending constraints, home lending enquiries fell by 42% year-on-year for the March 2022 quarter. However, home loan enquiries for the quarter March 2022 were above quarterly volumes for 2019 and the first half of 2020.”
Luffman said the softening demand was playing out in lower numbers of new retail credit accounts being opened which continued to be near their lowest levels since the start of the pandemic.
“Demand for credit is being significantly impacted by a sharp fall in consumers refinancing or moving their credit relationships,” he said.
Unsecured credit demand activity also declined, with the biggest impact being credit card enquiries which fell by 36.2% year-on-year for the March 2022 quarter.
By comparison, personal loan applications fell 29.7% for the same period.
